The price order on the licensed trade has expired and publicans are free to put up prices. This is exactly what they have done. Not to do so in a controlled market would not make economic or business sense.

The price order was imposed last year at a time of rapidly rising inflation. At that time, the Government realised that inflation would be coming down in January as the effect of cigarette price hikes and oil price rises fell out of the index.

Every observer pointed out that prices would simply revert to market levels and there would be a temptation for publicans to add on a bit extra to compensate for the months of price stability.

That has happened and the Minister of State for Consumer Affairs, Mr Tom Kitt, must have realised that this would be the case - despite his protestations earlier this week.

There are reports that some publicans have put up the price of a pint by as much as 12p (15 cents), despite Mr Kitt's exhortations to be "reasonable and responsible".

There is also the question as to whether they have passed on the cut in VAT that should have led to price cuts of around 2p a pint.

In retaliation, the Minister has said he is considering further liberalisation of the market or possibly the reintroduction of price controls if publicans do not start behaving. But it is unlikely that many of them will take this warning seriously.

As the Minister admitted, price controls are a "blunt instrument" and cannot be put in place indefinitely. In addition, the deceleration in inflation means this is not "a bread-and-butter issue".

Liberalisation would seem to be the option open to him and it is the most sensible course. But is it a runner? Last year, following the introduction of the Intoxicating Liquor Bill, a Commission of Licensing was set up.

This was the Government kicking to touch; the Commission is not due to report until late 2002, well on the other side of a general election. Again this week, Mr Kitt insisted that the Commission must be the way forward.

In simple terms, this means that the Government is continuing to ignore a 1998 Competition Authority report on the licensed trade that recommended completely liberalising the market.

Another report submitted to the Commission made the same case, arguing that current restrictions make it impossible for the market to function efficiently or in the best interest of the consumer.

The Government has additional ammunition now. The High Court decision that led to the deregulation of the taxi industry should just as easily apply to the licensed trade. If the Government had no right to regulate the number of taxi licences, then its regulation of pub licences could be equally unconstitutional.

However, the market that is most likely to see real competition is pharmacies, because they are perceived as a soft target.

The Minister for Finance, Mr McCreevy, made a telling observation last year in relation to publicans. He pointed out that many TDs hold their weekly clinics in pubs - in many rural areas there is no option. This gives the publican excellent lobbying power. On top of that, the Licensed Vintners' Association and the Vintners' Federation of Ireland are formidable lobbyists that no Government of any hue has ever taken on.

In 1996 Ms Nora Owen, the then Minister for Justice, established an all-party Dail committee to investigate the licensed trade, but no significant action followed.

Despite the Tanaiste, Ms Harney's support for reform, the Government also fears a Dail revolt and particularly the likely reaction of Jackie Healy-Rae and other Independent TDs. The result is a system that is inimical to the interests of consumers.

More than two years ago, the Competition Authority initiated proceedings in the High Court for alleged "concerted price fixing" against the two main publicans' organisations, along with a number of individuals.

The legal action followed raids by the Competition Authority in which documents were seized, as part of an investigation into price collusion in the sale of drink. But because of congestion in the courts, the case has yet to be heard.

In its report, produced for the Tanaiste, the authority stressed the need for the introduction of real competition. It recommended the removal of barriers to entry to the pub market, particularly in Dublin, where prices at that time were up to 12 per cent higher than elsewhere.

The Intoxicating Liquor Bill concentrated on extending pub opening hours. It also modified the procedure for acquiring a licence.

As rural pub licences can be transferred to Dublin, the number of pubs in the country will be reduced but this is unlikely to meet the demand for new pubs in the capital. Dublin has 29 per cent of the State's population, yet has only 9 per cent of its pubs. In the capital, the demand for pubs has risen dramatically due to the increase in population and incomes.

As the author of the Competition Authority report, Mr William Prasifka, said when his report was published: "If you believe people in Dublin should all drink in a crowd while people in the country should drink alone, then it makes sense."

But this is not just a matter for the Irish consumer. The high price of drink in Ireland is also bad news for the tourist industry.

European Commission data show that, when relative purchasing powers are taken into account, Ireland's drinkers face the highest bills in Europe.

The only scenario that may cause the Government to take real action is a consumer backlash. But one thing is clear - removing barriers against entry to the trade is the only way forward.